Amazon wants you to never run out of water filters, detergent, or printer ink ever again. Source: Amazon.
Hidden inside the recent announcement of Amazon.com's (NASDAQ: AMZN) new Dash button -- which lets your order specific products with a single plastic button -- was a much more important move for Amazon, and one that has the possibility to truly change how we order consumable goods from Amazon.
It's called the Dash Replenishment Service (or DRS), and its ability to automatically reorder home goods straight from the devices that use them could be a transformational step in the burgeoning Internet of Things.
All-knowing devices
When we think about our home appliances, they typically serve one purpose. They either toast our bread, keep our food cold, wash our clothes, or make our coffee. They're usually good at what they do, but are incapable of doing more than their basic function.
But the Internet of Things (or IoT) is changing that. It's adding intelligence and connectivity to these formerly unperceiving appliances, allowing them to understand what they need, when they need it, and how to get it.
And that's where Amazon's DRS comes in. Amazon has teamed up with appliance manufacturers to create an automated system that allows some appliances to reorder the goods they need -- all by themselves -- through Amazon's website.
Let that sink in for a moment. For anyone who hates making grocery lists, despises trips to the store, or just wants to spend more time not having to do those things (I can't be the only one), this could be a new way to shop. Or, actually, a new way not to shop.
The best example of it right now is Whirlpool's new smart washing machine set to debut later this year, which will come preloaded with Amazon's Dash Replenishment Service. The washing machine will not only measure when it's running low on detergent but will also order it for you through your Amazon account when it starts running low. Two days later, assuming you have an Amazon Prime Membership, there's detergent on your front doorstep.
If automatic replenishing isn't what manufacturers want, they can also build an order button right into the hardware that users can physically push to reorder an item.
This coffee maker can order more beans automagically. Source: Amazon.
Starting small, but thinking big
Right now, Amazon has just a handful of companies incorporating DRS directly into their new devices. Aside from Whirlpool, select Quirky coffee makers will reorder beans when they need to, and Brita's releasing a smart water pitcher that automatically orders filters when low.
But Amazon says it wants all companies, large and small, to incorporate the technology into their new devices.
That's because Amazon knows that the Internet of Things is no gimmick. Connected cars, homes, appliances, etc., are already here, and with them come the ability to automate things like never before.
Amazon's sneaky new way to get more sales
Back in 2008, there were more things connected to the Internet than people, and by 2020, the amount of Internet of Things connections will reach 50 billion.
Many of these connected things will collect data and analyze it, send notifications, talk to us, or just work silently in the background. And if Amazon has its way, they'll order consumable goods for us as well.
The opportunity for Amazon is pretty straightforward. If the online retailer can get companies to implement DRS into their devices, then it essentially locks in consumers to buying through the Amazon website. Put another way, it converts these products into a source of subscription revenue.
Of course, they could always turn the auto-purchases off, or not push the button when they need new consumables, but it's easy to imagine people letting the devices order what they need because, well, they simply need it.
IDC estimates the Internet of Things will be worth $7 trillion by 2020, and while clearly not all of that will come from household goods sold through the IoT, Amazon is likely looking at that huge number and realizing it needs to somehow make something from IoT's potential.
Amazon's Dash Replenishment Service is a brilliant move because it fills a need (getting stuff when you actually need it) and makes it easy for consumers to get on board (once it's set up, you literally have to do nothing).
It's a bit premature to make predictions on how much revenue Amazon's DRS could bring to the company, but I'll be watching this new service closely (investors should, too) to see how many manufacturers start signing up for it. Amazon's made it easy to implement DRS into new devices -- it takes as little as 10 lines of code -- and that could be the key to its success. If that happens, some of Amazon's sales will be on auto-pilot -- which is more than any company, and its investors, could ask for.
